Plaintiff's Voluntary Payment of Disputed Sum and Delay in Bringing Suit Dooms Claims

On September 18, 2017, Justice Sherwood of the New York County Commercial Division issued a decision in Beltway 7 Properties, Ltd. v. Blackrock Realty Advisers, Inc., 2017 NY Slip Op. 31985(U), dismissing claims relating to a payment alleged to have been made under duress under the voluntary payment doctrine and because of the plaintiff's delay in bringing suit.

In Beltway 7 Properties, the plaintiff found itself in the position of having to pay almost $2 million in late fees and interest in order to avoid foreclosure. The plaintiff later brought an action on various theories disputing its obligation to make the payment. Its claims were dismissed for several reasons, including the following:

Plaintiff alleges it made payment under protest. Not just any form of protest is sufficient to overcome the voluntary payment doctrine, however. Rather, in order for a protest to be characterized as appropriate, it must be in writing and must have been made at the time of payment. Additionally, this written protest must indicate that plaintiff was reserving his rights when it made payment.

While on a motion to dismiss, it is assumed, of course, that a plaintiffs factual allegations are true conclusory allegations will not serve to defeat a motion to dismiss. Thus, it is not enough to simply allege that protest was made. Rather, plaintiffs allegations must be sufficient to establish that its protest satisfied the above requirements. Although plaintiff alleges it immediately protested, it offers no explanation as to the manner in which it purportedly communicated such protest - let alone how its protest satisfied the above requirements. Plaintiff does not state whether its protest was in writing or to whom this protest was communicated to.
Moreover, there is no indication that Beltway took steps to indicate that it was reserving its rights when it made payment to BlackRock. Accordingly, plaintiff has failed to establish formal protest sufficient to defeat the voluntary payment doctrine.

. . .

A threatened loss of property could be the basis of an economic duress finding. As noted, above, Mr. Nasr states that Beltway had no choice but to pay; if it had not, BlackRock would have foreclosed on Beltway's interest in L Reit, which was the security for the Mezzanine Loan. Had this occurred, Beltway would have lost its entire 75 million dollar interest in the Mortgaged Property, which it held through its interest in L Reit. However, one who would recover moneys allegedly paid under duress must act promptly to make his claim known. Beltway waited one and one-half years prior to instituting this action and did not assert a defense of duress until nearly two months afterwards. Plaintiff's delay of nearly two years before instigating this action or asserting a defense of duress negates its claim of economic duress. Since a contract entered into under duress is voidable, not void, courts have found that parties have waived the defense by failing to act promptly to repudiate. The same principle also applies to payments allegedly made under duress, and one who would recover moneys allegedly paid under duress must act promptly to make his claim known.

(Internal quotations and citations omitted) (emphasis added).